Paying for the NDIS: what about a levy?

Parliament house flag post

Paying for the NDIS: what about a levy?

Posted 30/04/2013 by Luke Buckmaster


Image source: Australian Government
There is increasing speculation that the Gillard Government is considering introducing a levy to help pay for the National Disability Insurance Scheme (NDIS). The question of how the NDIS would be financed was one of the key issues examined by the Productivity Commission (PC) in its inquiry which lead the Government to introduce the scheme.

This post outlines the importance of the financing issue and what the Productivity Commission recommended as a model for funding the NDIS. It highlights some of the key questions relating to the design of a levy for the NDIS.

Currently, most disability care and support in Australia is funded and provided by the states and territories. The Commonwealth's financial contribution to the $7.1 billion in funding for disability is around 30 per cent. According to the PC, funding for disability under its proposed NDIS (since renamed DisabilityCare by the Government) would need to almost double to $13.6 billion in order to meet the shortfall in support provided under the current system. 

The significance of financing the NDIS goes beyond the issue of where the additional money will come from. As with the health system, funding for disability has long been the subject of debates about cost- and blame-shifting between the Commonwealth and state and territory governments. The need to ensure the security of funding for disability into the future was therefore an important part of the thinking behind the NDIS. As I have suggested elsewhere:
The question of how the NDIS will be funded (will be there be an agreed formula entrenched in legislation?) is crucial in determining whether the longstanding problem of funding shortfalls will be adequately addressed. In the absence of an adequate and secure funding base, the NDIS would, in the long run, provide little advance on current arrangements.
Noting that 'current funding for disability is subject to the vagaries of governments' budget cycles', the Commission proposed that the Commonwealth ‘should finance the entire costs of the NDIS by directing payments from consolidated revenue into a 'National Disability Insurance Premium Fund', using an agreed formula entrenched in legislation’. The formula would need to provide 'stable revenue to meet the independent actuarially-assessed reasonable needs of the NDIS' and include funding for adequate reserves.

The Productivity Commission's proposal that the Commonwealth become single funder of the NDIS was based on the view that: 
 ... this would provide certainty, clear lines of funding responsibility, avoid the inefficiencies of the Commonwealth-State ‘blame game’ that afflicts some shared funding arrangements, and reflect the Australian Government’s unique capacity to raise efficient and sustainable taxes of the magnitude required.
In the event the Government chose not to pay for the NDIS from general revenue, the Productivity Commission suggested it introduce 'a levy on personal income ... with an increment added to the existing marginal income tax rates'. Unlike the Medicare Levy which only pays for about half of the $18 billion annual cost of Medicare, the NDIS levy would be 'hypothecated to the full revenue needs of the NDIS'. The rate of the levy would take 'sufficient account of the pressures of demographic change on the tax base' and create 'a sufficient reserve for prudential reasons'.

The Commission’s preference for payments directed from consolidated revenue rather than a levy or tax was that the latter ‘would lack the flexibility and efficiency’ of the former.

The Government has previously ruled out introducing a levy to fund the NDIS. The idea of a levy is not supported by the Opposition but was reportedly proposed as a funding model by Queensland Premier, Campbell Newman, in July 2012. 

In December 2012, the Prime Minister is reported to have given an assurance that the funding of the NDIS will be ‘inscribed’ in the finances of the nation, though the details of how this would be done had not then been agreed. According to a media report, the Prime Minister indicated that (at least some of) the funds may come from ‘responsible savings’ across government outlays and that more information about financing the NDIS would be made available in the 2013–14 Budget.

The precise form of the levy reportedly being considered by the Government is not yet known. Key questions related to the design of an NDIS levy include:
  • would it be separate to or included as part of an expanded Medicare Levy?
  • would it be expected to cover the full cost of the NDIS or only part of the cost?
  • would it cover the Commonwealth's share only or would the Commonwealth become the single funder for the NDIS? 
  • consequently, what would be the rate of any such levy? (The current Medicare Levy of 1.5 per cent raises around $9 billion annually).
  • would revenue from any levy be paid into consolidated revenue or into a separate NDIS fund?
These design questions would probably intersect with political questions about how to best gain support for an NDIS Levy and indeed how to retain what appears to be widespread public support for the NDIS.

(post updated 8am, 1 May 2013)


Thank you for your comment. If it does not require moderation, it will appear shortly.

Add your comment

[Click to expand]

We welcome your comments, or additional information which is relevant to a post. These can be added by clicking on the ‘Add your comment’ option above. Please note that the Parliamentary Library will moderate comments, and reserves the right not to publish comments that are inconsistent with the objectives of FlagPost. This includes spam, profanity and personal abuse, as well as comments that are factually incorrect or politically partisan. We will close comments after three months.




Captcha
Generate a new image
Type characters from the image:

Facebook LinkedIn Twitter Add | Email Print

FlagPost

Flagpost is a blog on current issues of interest to members of the Australian Parliament


Parliamentary Library Logo showing Information Analysis & Advice

Archive

Syndication

Tagcloud

Refugees asylum climate change immigration Australian foreign policy parliament social security welfare policy elections welfare reform school education health financing higher education Australian Defence Force emissions trading indigenous Australians women private health insurance people trafficking illicit drugs gambling health reform federal election 2010 United Nations Employment Asia disability income management Middle East Medicare Australian Bureau of Statistics statistics sport health forced labour federal budget Afghanistan Industrial Relations Carbon Pricing Mechanism politics dental health United States aid child protection environment poker machines Australia in the Asian Century Australian Sports Anti-Doping Agency steroids World Anti-Doping Agency National Disability Insurance Scheme detention aged care 43rd Parliament slavery health system Law Enforcement Australian Federal Police Criminal Law Fair Work Act Australian Public Service governance labour force people smuggling transport debt taxation international relations constitution New Zealand food WADA Australian Crime Commission pharmaceutical benefits scheme pensions public service reform children's health Aviation foreign debt gross debt net debt defence capability parliamentary procedure Senate Senators and Members ALP ASADA Newstart Parenting Payment multiculturalism Youth Allowance sea farers social media Higher Education Loan Program HECS federal state relations accountability Papua New Guinea youth paid parental leave same sex relationships corruption coal seam gas customs planning federal election 2013 Australian Electoral Commission doping OECD crime health risks International Women's Day Gonski Review of Funding for Schooling sex slavery Special Rapporteur Northern Territory Emergency Response social policy Mental health welfare ASIO intelligence community terrorist groups Australian Security Intelligence Organisation carbon tax mining High Court military history electoral reform employer employee renewable energy regional unemployment fishing European Union Federal Court family assistance skilled migration banking United Nations Security Council Australian economy forestry food labelling vocational education and training Drugs UK Parliament welfare systems Indonesia children Constitutional reform local government codes of conduct terrorist financing homelessness Parliamentary remuneration money laundering Trafficking in Persons Report energy science social inclusion human rights paternalism Australian Secret Intelligence Service sexual abuse terrorism World Trade Organization Australia public health China housing affordability bulk billing political parties water productivity health policy Governor-General US economy trade unions domestic violence export liquefied natural gas foreign bribery firearms question time speaker superannuation public housing election results by-election expertise public policy climate Intergovernmental Panel on Climate Change leadership voting Department of Agriculture Fisheries and Forestry regulation Pacific Islands reserved seats research and development new psychoactive substances synthetic drugs UNODC carbon markets animal health middle class welfare ADRV Census Indigenous constitutional recognition of local government referendum consumer laws PISA competition policy royal commission US politics violence against women language education baby bonus Leaders of the Opposition citizen engagement policymaking Australia Greens servitude Trafficking Protocol forced marriage Population rural and regional alcohol entitlements ministries Hung Parliament social citizenship maritime Iran transparency ANZUS regional students school chaplains federal budget 2011-12 salary Medicare Locals primary care Building the Education Revolution Members of Parliament Scottish referendum early childhood education Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly national security smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Southeast Asia Israel Palestine asylum refugees immigration political finance donations foreign aid disability employment Economics efficiency human rights; Racial Discrimination Act employment law bullying asylum seekers Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies same-sex marriage disorderly conduct integrity retirement Parliament House standing orders prime ministers election timetable sitting days First speech defence budget submarines workers financial sector Canada Somalia United Kingdom GDP Tasmania world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission limitation period universities Ireland cancer gene patents genetic testing suspension of standing and sessional orders live exports infant mortality honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC nutrition anti-dumping Rent Assistance obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements administrative law small business Breaker Morant regional engagement social determinants of health abortion Members suspension workplace health and safety marine reserves hearing TAFE Victoria astronomy resources sector YMCA youth parliament Korea fuel rebate Australian Greens presidential nomination Racial Discrimination Act political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education Social Inclusion Board early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin sanctions Norway hospitals republic President Barack Obama Presidential visits qantas counselling Korean peninsula Work Choices biosecurity hendra environmental law federalism federation preselection therapeutic goods Therapeutic Goods Administration plebiscites computer games pests suicide nuclear COAG Ministerial Councils floods ADHD stimulant medication advertising electricity extradition standards conscience votes poverty preventative health rural health coastal erosion Parliamentary Budget Office NATO work-life balance

Show all
Show less